‘I wish to make a complaint. I wish to complain about this parrot.’ At this point I will stop being one of those people who quote Monty Python because they have nothing funny of their own to say. Instead I will focus on complaints. Believe it or not, complaints can actually be beneficial to your business.
I’m not suggesting you should be one of those firms that says, ‘We welcome complaints’, neither am I suggesting you should let your service go to the dogs just to ‘benefit your business’. But I do believe that complaints can provide you with the necessary information to improve your business. It is those customers who are at the sharp end of the service you provide who are best-placed to inform you on the specific areas where improvements can be made. Without this feedback there is the danger your business may simply stagnate, and customers, instead of bothering to complain, may well just vote with their feet.
Low-risk
The good news is that as a mortgage intermediary you probably haven’t had that many complaints to deal with. In the days before the Financial Services Authority (FSA), the Mortgage Code Arbitration Scheme (MCAS) under MCCB used to deal with approximately 100 complaints a year. With the move to statutory regulation, we would expect the number of complaints to increase, and this has certainly been the case. But the numbers are still relatively small and the mortgage broker is still viewed as low-risk by the Financial Ombudsman Service (FOS).
The FOS Annual Review gives a strong idea of the low-risk mortgage intermediaries currently pose, although there are signs that the number of complaints against intermediaries, and on mortgage products in general, is on the rise. Only 3 per cent of complaints were made against mortgage and general insurance intermediaries, compared with 45 per cent against life insurance and investment product providers, 26 per cent against banks and 14 per cent against IFAs.
The FOS took on 112,923 new cases for the year ending 31 March 2006, of which 69,149 concerned mortgage endowments. Indeed, two-thirds of the work the FOS carries out involves mortgage endowments. Mortgage-specific complaints account for 29 per cent of all banking-related complaints and these have seen an increase of a third during the year. The FOS puts this down to an increasingly complex market and the numbers of complaints between consumers and lenders on mortgage products’ terms and conditions seems to bear this out.
Complaints relating to arrangement fees for ‘arranging or securing mortgage products’ have also increased and the FOS feels this is because the results cover the first year it has handled complaints about mortgage intermediaries. Complaints about the ‘exit fees’ charged by lenders have also increased over the year.
Seeking out options
Readers of Mortgage Introducer will be aware of the FOS funding review consultation currently taking place. AMI will, of course, be responding on behalf of its members with its preferred option for the Ombudsman’s future funding. Currently, 70 per cent of the FOS’s funding comes through the case fee system, with the balance through annual levy. Currently those firms with both mortgage and general insurance permissions pay £50 per permission and this includes two free cases. With the number of complaints against mortgage intermediary firms already on the rise, AMI is seeking a funding option which not only keeps costs to a minimum for firms but provides ‘business insurance’ for any further increase in complaints.
In looking for our favoured funding option, AMI has consulted its members on the number of complaints they have received since ‘Mortgage Day’ and their thoughts on future rises in complaint numbers and where they may originate from.
The good news is that 77 per cent of AMI members have received no complaints since ‘Mortgage Day’. Of the 23 per cent who have, 12 per cent have received one to two, 4 per cent three to five, 1 per cent six to nine, and 6 per cent have received 10 or more. The majority of the complaints received were never referred to the Ombudsman but 34 per cent did have one to two cases referred, 4 per cent had three to five, and 4 per cent had six to nine.
34 per cent of firms have seen the number of complaints they receive increase since ‘Mortgage Day’ while many (73 per cent) believe client management companies (CMCs) – also known as ‘ambulance chasers’ – will begin to target mortgage clients in the future. This may increasingly be the case given the number of mortgage endowments complaints seems to have hit a plateau and these CMC firms will be looking for the next big ‘scandal’ to chase. Finally, AMI member firms were asked if they believe the number of complaints made against mortgage intermediaries will continue to rise in the future – 78 per cent felt they would.
Systems and controls
It does seem clear from our research that, while members have not been subject to a vast increase in complaints since ‘Mortgage Day’, they do feel complaints will rise in the future and therefore intermediary firms need to make sure they have the necessary systems and controls in place to deal with those complaints and ensure they are not unduly burdened by the funding requirements of the Ombudsman Scheme.
AMI will use this research to feed into our policy on the FOS funding review. We have previously announced our support for Option H which would mean a £220 flat rate and 10 free cases per firm, but we are still consulting on our formal response and would appreciate any feedback on this issue from members.
Rob Griffiths is associate director of the Association of Mortgage Intermediaries (AMI)
